Doctors Overlook These Five Contract Areas at Their Own Peril
By Ethan Nkana
When a doctor is getting ready to accept a new position with a healthcare system, the temptation might be to gloss over the dense legal language and stipulations in their employment contract, skip straight to the compensation dollars, and ink their signature.
As long as the salary meets the doctor’s expectations, there’s no need to get unduly sidetracked by all the other minutiae, right? Wrong.
There are five key areas doctors need to carefully evaluate in their contract. Overlooking “The Big Five” can have major financial and professional consequences.
The first one is duties and responsibilities: where you're going to work, how often you're going to work, and what the expectations are of you while you're at work.
“Where” is important because most hospitals these days aren’t standalone entities – they’re part of a larger health system. An unsuspecting doctor might sign a contract that says that they will agree to work at any of the hospitals within the system, even the far-flung locations an hour or more away. Unless you really like listening to Books on Tape during your commute, that might not be an optimal situation.
Meanwhile, exactly how many shifts per month are you expected to work? And how many hours are those shifts? Are they 12 hours – or 24 hours? From a lifestyle perspective, those details can be the difference between a manageable schedule and burning the candle at both ends.
Those details are also critical from a dollar perspective. If you work more shifts than your contract calls for, how will you be compensated? Unless you’ve spelled out “For each shift beyond X number of shifts per month, Dr. Smith will be compensated at a rate of $1000/shift”, you're going to be working those extra shifts for nada.
The second of the Big Five areas to pay attention to is “term and termination”: What is the duration of your contract, and how can you get out of your contract? If doctors don't have a term specified, they’re considered an employee in perpetuity, which means there’s no opportunity to revisit their salary or other aspects of the job at a logical and natural timepoint. Specifying a standard term, like a two-year or three-year term, eliminates that problem. It may sound simple, but this is a costly mistake that is made frequently in contracts.
Handling termination provisions requires similar care. Termination generally comes in two different flavors: termination with cause, and termination without cause, where the healthcare system can terminate the doctor’s employment for any reason they want, as long as it's not illegal.
You can see how quickly the rug can get pulled out from under you when termination without cause is in play. Savvy doctors will take a close look at that provision in their contract and make sure to specify that they’re given at least 90 days’ notice for termination without cause, so that they have a three-month runway to find a new job.
Restrictive covenants is the third contract area to watch out for. Put simply, what kind of non-compete provisions are embedded in the contract? Hospitals don’t like losing their doctors and they really don’t like losing patients, so these provisions are more onerous than most people realize.
If a doctor leaves a system, they usually have to move outside of a geographic area that the system has defined for a certain length of time if they want to ply their trade. Their other option? Pay a fine that is commensurate with the “financial harm” that the hospital believes it will suffer if the doctor practices medicine for a competitor within their competitive marketplace. That penalty can be an eye-watering six figure sum and can be enforced by the employer even when the doctor dutifully fulfills the terms of their employment agreement.
Neither of these is a particularly appealing option, so what’s a smart doctor to do here? While it can be difficult to remove restrictive covenants entirely, doctors should try to mitigate these provisions. Instead of having to move 15 miles outside of town for at least 3 years, for example, they might negotiate it down to practicing medicine 5 miles outside of town for 1 year, or even 6 months.
Incidentally, in recent months, the Biden administration has publicly taken a dim view of non-compete provisions, questioning their value to the economy and to professional networks, so doctors have more leeway and more muscle here than they have in the past.
The fourth area to carefully keep an eye on is the seemingly unassuming category of education loan debt assistance. On average, doctors accumulate between $200,000-$300,000 in student loan debt, which typically takes them 13 years to pay off.
What will your employer do to help you out on this front? Sure, you’re getting a nice salary, but will they also specifically contribute towards your student loans and education debt, on top of the salary?
This assistance is bit like a secret menu item at In-N-Out Burger: If you don’t know that it’s something you can ask for, you’re not likely going to get it. A good practice is to ask the employer to pay down a certain percentage of the debt per year over the course of the contract. A contribution of $40,000 per year over three years, for instance, can make a sizeable dent in that pile of debt.
The last of the Big Five considerations is bonus compensation. This is another one – like education loan debt assistance – where if you don’t ask for it, you won’t get it. Aside from their salary, what kind of money will be coming the doctor’s way via bonuses?
Will there be a signing bonus the moment the doctor officially signs the contract to start their new work engagement? Will the doctor receive a quality bonus for helping improve quality metrics around clinical outcomes? Is there a production bonus for exceeding a certain number of procedures performed per year? These bonuses are not insignificant, and they add up.
Doctors are smart, diligent people, and they’re also human, which means they’ve only got so much mental bandwidth to devote to various tasks. If there are 100 different points in a contract, something like “term and termination” might be number 97 or 98, whereas number 1 might be salary. It’s a matter of not knowing exactly what to look for.
As the saying goes, you don’t know what you don’t know. By paying attention to the Big Five, however, doctors can ensure they don’t get burned by their contracts without even realizing what they’ve signed up for.
Ethan Nkana is Principal of RMPA (Rocky Mountain Physician Agency), which specializes in negotiating physician contracts. Professional athletes spend their entire lives training to develop their skills and strength in mastery of their sport at the highest professional levels. Similarly, physicians train their entire lives developing a mastery of the sciences and medicine. Why don’t physicians have agents who negotiate their deals like professional athletes?
This inquiry was the genesis of Rocky Mountain Physician Agency.
After more than one decade in hospital and healthcare administration, specializing in physician contracting and compensation, Ethan recognized that his skills, training, and expertise could be put to more meaningful use negotiating physician contracts on behalf of physicians.
The extensive experience Ethan has in physician contracting is founded on a doctorate degree in law from the University of Dayton School of Law. While completing his legal training, Ethan earned his master’s of business administration, also from the University of Dayton. He earned his B.S. in Business Administration & Public Relations from Southern Adventist University.
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